Small loans with a huge impact

What better way to mark Cambridge Enterprise's Tenth Anniversary than by lending a hand to aspiring entrepreneurs? We are excited to announce that we're raising money for the remarkable MicroLoan Foundation.

MicroLoan works in sub-Saharan Africa, a place where some 389 million people live in poverty. As its name suggests, MicroLoan provides very small loans, typically between £20 and £60. Since 2002 the organisation has disbursed over £25 million in more than 370,000 loans. The recipients are among the most vulnerable women in the region.

Why women? First because they are far more likely to be financially excluded. Because they bear the brunt of family responsibilities, it is hard for women to seek employment. They typically are also disadvantaged by local culture and traditions. In much of the region, for instance, women lack basic legal rights such as the right of inheritance. Lack of education and low literacy levels among women further compound their difficulties.

MicroLoan not only provides these women with capital, but also gives basic business training, mentoring and support. The process starts with Loan and Training Officers travelling by motorbike to remote villages to identify those in the most need who have the potential to start small businesses. These women then form their own support groups of about 15 members.

Together they attend eight MicroLoan training sessions, learning basic business principles, how to manage their money and how to work cooperatively. They are taught to save regularly. In addition to being financially prudent, this gives them the resilience to survive setbacks, like bad harvests or the need to take in orphans after the death of a relative.

Many of MicroLoan’s clients have never set foot in a bank. The organisation helps each loan group open a bank account, giving the women access to banking services for the very first time. The group bank account is used to make loan repayments and deposit savings.

The women decide together what type of business they want to set up. Many have an agricultural element but they can range from trading second hand clothing to making tea and fritters to selling fruit and vegetables. Every two weeks, a Loan and Training Officer checks in with the group to discuss progress, collect repayments and share successes. Most importantly, they deliver more training and provide support.

The other primary reason that MicroLoan chose to work with women is that they reinvest 90 per cent of every dollar earned into their families. So by helping women to help themselves, MicroLoan also supports their children and their extended families. With a regular income women are able to provide the basics for their families—food, shelter and medicine.

As their income increases, the women can also afford school fees. The children they look after are more likely to complete their education when they do not have to be taken out of school because of financial pressure or the need to help out at home. Since 2002 MicroLoan’s work has led to approximately 600,000 children being able to attend school.

Eventually many of the businesses grow sufficiently to create employment for others—kick starting a virtuous economic circle. As they grow, these businesses help villages, communities and even regions to prosper.

Over 97 per cent of the loans are repaid in full, on average after just four months. At this point, with recipients earning a regular income, they can apply for another loan to grow their business further. As the loans are repaid, MicroLoan uses the funds to help more women. Thus a small investment goes a long way, helping more and more women achieve financial security for the first time in their lives.

Please consider joining us in supporting this remarkable organisation. Visit our donation page or get involved in one of the events we will be hosting for MicroLoan Foundation in 2017.